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His Back Against the Wall

German media mogul Leo Kirch is being forced to pay out 767 million euro for a piece of his own debt-laden company. The move could harm both Kirch and his friend Edmund Stoiber, who is making a run at the chancellory.

Things aren't looking up

The news just keeps getting worse for German media mogul Leo Kirch.

His giant media concern is reportedly in debt to the tune of 6 billion euro. His creditors are asking for their money back and he has had to stomach rumors that alternately Rupert Murdoch and American media giant Liberty Media had designs on his cherished KirchGruppe.

Now this.

Last week, German publisher Axel Springer announced that it has demanded KirchGruppe buy back the publisher’s 11.5 percent share of television ProSiebenSAT.1. The demand means that Kirch, already laden with debt, will be forced to pay back 767 million euros to Springer.

In an evasive maneuver, Kirch, who owns a 40 percent stake in Springer, announced the contract legally void, setting both sides up for a court battle.

Kirch, a big money-maker for Bavaria, has long enjoyed political support in the southern German state. Bavarian Landesbank, 50 percent of which is owned by the state, has already extended more than 2 billion euro in credit to KirchGruppe.

Last week, members of Bavarian parliament’s opposition parties warned Stoiber, who is reportedly good friends with Kirch, against allowing the bank to extend more credit.

Financial ballast

The Axel Springer purchase was made when things were looking a lot better for Kirch. With the merger of Pro Sieben and SAT.1, two of Germany’s major television channels, Kirch had created the biggest private television empire in Germany.

Last year, he announced the launch of his sports pay-per-view channel, Premier Live, with much fanfare and bought the rights to televise Formula 1 races. He added to that the rights to televise soccer’s World Cup this year and in 2006.

Those acquisitions look like just more financial ballast now, with Premier failing to live up to expectations and the price for the 2002 rights looking to put Kirch 800 million euro further in the hole.

Kirch’s options are few. Plans to take KirchMedia, Kirch’s largest subsidiary, public in June could attract new investors and capitol. But no one knows if Kirch can survive that long. And in as politically sensitive a year as this one, Stoiber can’t afford to bail his old friend out.